The European Banking Authority has published final draft Regulatory Technical Standards (RTS) setting out how institutions should allocate off-balance sheet items to the Capital Requirements Regulation (CRR) buckets that determine credit conversion factors under the standardised approach to credit risk, and how to assess constraints on cancelling unconditionally cancellable commitments. The RTS introduce assignment criteria for off-balance sheet items not already mapped to any of the five buckets in Annex I of the CRR, aiming to differentiate conversion probability based on factors including the presence of financial covenants, conditions linked to non-credit events, and the obligor’s optionality to draw the commitment. A non-exhaustive set of examples is included to support classification. For unconditionally cancellable commitments, the RTS specify four constraining factors relating to risk management processes, commercial considerations, and reputational and litigation risks, and propose using the COREP framework for notifications of off-balance sheet items not included in Annex I to reduce reporting burden. Developed under Article 111(8) of Regulation (EU) No 575/2013, the final draft RTS have been adopted by the EBA and submitted to the European Commission.
European Banking Authority 2025-08-18
European Banking Authority publishes final draft RTS clarifying conversion factor bucket allocation for off-balance sheet items
The European Banking Authority has published final draft Regulatory Technical Standards (RTS) detailing the allocation of off-balance sheet items to Capital Requirements Regulation (CRR) buckets for credit conversion factors under the standardised approach to credit risk. The RTS introduce criteria for items not mapped to CRR buckets, focusing on conversion probability factors and constraints on unconditionally cancellable commitments. Developed under Article 111(8) of Regulation (EU) No 575/2013, the RTS have been submitted to the European Commission.